Ever since the financial crises hit our economy in 2008, most things we do and the way we do them have changed. They call these changes the new normal. The way we pay our bills, shop, drive, communicate and are even entertained. We use our smart phones for just about everything else. Our industry has not escaped these changes. In fact the majority of professional operators have endorsed these changes whole heartedly.
Telemetry that's run with Cantaloupe Systems, Parlevel Systems and others giving us remote monitoring, plug and track, and all new sorts of payment systems. Connected warehouses and pre kitting. Touch screens and digital displays. Micro markets, in which many are put together almost instantly, can be operated from a tablet and some that are actually profitable for accounts less then 50 employees.
These are the changes that improve efficiency and productivity. Reduce labor costs, theft and waste. Make servicing and re-stocking equipment more precise with reduced windshield time. This new normal of technological advances couldn't have come along at a better time. For some.
Of course there is major investment, technical skills and retraining that is needed to produce the bottom line results that these systems and gadgets promise. Unfortunately many of you are past the time, whether it's financially, chronologically, or emotionally to invest and apply this new normal world of vending to their operation. Many of the industry's promising children and grandchildren have moved on from their founder's dream and want to do more interesting, more technical and less hands on endeavors. So this new normal way of operation has not benefitted all.
Of course, not all change is positive. Over the past years we have seen numerous rules, regulations and taxes that continue to hurt the bottom line. Obesity guidance, nutrition info on machines and products, plastic bottle and forced recycling rules at some universities and "Green" companies, higher sales and use taxes in numerous localities and of course those debilitating beverage and sugar taxes that are currently invading major cities across the country.
Health care has also become an elephant in the room. Most operators are facing even more employment issues than usual. The current health care regulations and the uncertainty of future ones is causing companies all over the country to limit growth while waiting to see how the new rules will affect their employees and their business. Not only is this a concern for your workers but the workers and operations of your customers. The other main employment concern is: where ARE the employees? Numerous operators have listed or sold their companies in the past few years solely because they have tired of the complaints, the lack of enthusiasm and the difficulty in finding, training and retaining new hires.
As many smart and influential industrialists and economists have predicted the layoffs of millions of people due to increased usage of robotics and artificial intelligence, now and in the future, will result in less good jobs available. Unfortunately a larger number of you will still have trouble finding enough job seekers who want to work long hard hours and get their hands dirty. That's a new normal that doesn't benefit anyone.
So exactly how does this affect consolidation of the industry by way of acquisitions? Most of you don't need to be told that there are less and less good, financially secure and available purchasers then in the past. The large nationals and regionals plus many franchisees are still in the hunt right now but they are more specific on who and what they buy than ever before. It's always been an art to fit the right two companies together, but now it's become harder than in the past.
Normally the location of the seller, the equipment, personnel and customers of that seller were paramount to a buyer's interest. As this new normal has kicked in, other factors now will make it more difficult for some to sell at a reasonable price, if at all.
We now need to match the right technologies, systems and hardware or lack of it to the right buyer. As more top buyers are turning to telemetry and the other high tech mentioned earlier, purchasing a company without any of this is proving to be difficult for those who already have it. Besides trying to pay a fair price that a seller can live with, these buyers face the dilemma of having to upgrade or even replace hundreds of machines in an acquisition. This not only results in a lower purchase price but in some instances this results in no buyer at all.
As consolidation continues there are already numerous areas of the country where there might only be one or two aggressive buyers left. If they have the systems and you don't, this could be a cause of concern. We haven't seen a problem in selling MOST professional vendors but the price point dramatically changes based on the type of operation.
Of course the new regulations, heath care concerns and taxes discussed above, cause operators to ask for higher and higher prices for their services. And we all know how well these requests are appreciated by your locations! Asking them to lower or eliminate commissions in lieu of price increases also tend to get the cold shoulder. Our much larger brethren, with their lower cost of goods can weather these storms a little better than the majority of operations under $6 million. So if you are looking for an exit what should you do? Watch for the answer in tomorrow's VendingMarketWatch.com Today with Part 2 of The New Normal Of Vending Acquisitions.
About the author
MARC ROSSET is founder and president of Professional Vending Consultants Inc., a specialized intermediary for acquisitions of full-line vending and office coffee service companies in the U.S. PVC has represented more than 310 transactions with gross sales value of just over $900 million since 1993. Rosset has played a key role in helping to establish industry-recognized guidelines for the value of vending, OCS and foodservice companies. He can be reached at [email protected] or (312) 654-8910.